Emotion differentiation (ED), the extent to which same-valenced emotions are experienced as distinct, is considered a valuable ability in various contexts owing to the essential affect-related information it provides. This information can help individuals understand and regulate their emotional and motivational states. In this study, we sought to examine the extent to which ED can be beneficial in psychotherapy context and specifically for predicting treatment response. Thirty-two prospective patients with mood and anxiety disorders completed four daily assessments of negative and positive emotions for 30 days before receiving cognitive-behavioral treatment. Depression, stress, and anxiety symptoms severity were assessed pre- and post-treatment using self-reports and clinical interviews. We conducted a series of hierarchical regression models in which symptoms change scores were predicted by ED while adjusting for the mean and variability. We found that negative ED was associated with greater self-reported treatment response (except for anxiety) when negative emotional variability (EV) was included in the models. Probing negative ED and EV’s interactive effects suggested that negative ED was associated with greater treatment response (except for anxiety) for individuals with lower EV levels. Results were obtained while controlling for mean negative affect. Our findings suggest that negative ED can benefit psychotherapy patients whose negative emotions are relatively less variable. We discuss the meaning of suppression and interactive effects between affect dynamics and consider possible clinical implications.